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Tax Residency

Rules determining whether an individual or company is considered a tax resident in Singapore, which affects tax rates and obligations.

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Comprehensive Guide to Tax Residency in Singapore

Tax residency in Singapore is a critical concept for individuals and businesses, as it determines the tax rates and obligations applicable to income earned in or derived from Singapore. This guide provides a detailed overview of the regulations, criteria, procedures, and considerations related to tax residency in Singapore.

1. Overview of Tax Residency in Singapore

Singapore operates on a territorial tax system, meaning that taxes are levied on income earned in or derived from Singapore. Tax residency status is crucial because it determines the tax rates and exemptions applicable to an individual or entity. The Inland Revenue Authority of Singapore (IRAS) is the governing body responsible for tax matters in Singapore.

2. Tax Residency Criteria for Individuals

2.1. Definition of Tax Residency for Individuals

An individual’s tax residency status in Singapore is determined based on the number of days they are physically present in the country during a calendar year. The criteria are as follows:

  • Resident Individual:

    • A person is considered a tax resident if they are physically present in Singapore for 183 days or more in a calendar year.
    • Alternatively, a person who has worked in Singapore for three consecutive years may also qualify as a tax resident, even if they were present for fewer than 183 days in the first and last years of their employment.

  • Non-Resident Individual:

    • A person is considered a non-resident if they are physically present in Singapore for less than 183 days in a calendar year and do not meet the three-year rule.

2.2. Special Cases

  • Foreign Employees on Short-Term Assignments:
    • If a foreign employee works in Singapore for 60 days or fewer in a calendar year, their income is exempt from tax. However, this exemption does not apply to directors, public entertainers, or professionals such as consultants and trainers.
  • Dual Residency:
    • Singapore does not have a concept of dual tax residency. However, tax treaties with other countries may help resolve conflicts in residency status.

3. Tax Residency Criteria for Companies

3.1. Definition of Tax Residency for Companies

A company is considered a tax resident in Singapore if its control and management are exercised in Singapore. This typically refers to where the company’s board of directors meets to make key decisions.

3.2. Non-Resident Companies

A company is considered non-resident if its control and management are exercised outside Singapore. Non-resident companies are taxed only on income derived from Singapore and are not eligible for certain tax exemptions and incentives available to resident companies.

4. Tax Rates and Benefits

4.1. Tax Rates for Individuals

  • Tax Residents:

    • Tax residents are taxed on a progressive tax rate ranging from 0% to 22%. The first SGD 20,000 of chargeable income is tax-free, and the highest rate of 22% applies to income exceeding SGD 320,000.
    • Tax residents may also qualify for personal reliefs, such as spouse relief, child relief, and parent relief.

  • Non-Residents:

    • Non-residents are taxed at a flat rate of 15% on employment income or the progressive resident rates, whichever results in a higher tax amount.
    • Other income, such as director’s fees, is taxed at 22%.

4.2. Tax Rates for Companies

  • Resident Companies:
    • Resident companies are taxed at a flat rate of 17% on chargeable income. However, they may qualify for tax exemptions and incentives, such as the Start-Up Tax Exemption (SUTE) scheme and the Partial Tax Exemption (PTE) scheme.
  • Non-Resident Companies:
    • Non-resident companies are taxed only on income derived from Singapore, and they are not eligible for tax incentives.

5. Procedures for Establishing or Confirming Tax Residency

5.1. For Individuals

  1. Filing Tax Returns:

    • All individuals earning income in Singapore must file their tax returns annually by 15 April (for paper filing) or 18 April (for e-filing).
    • Tax residency status is automatically determined based on the number of days you are present in Singapore during the year.

  2. Requesting a Certificate of Residence (COR):

    • A Certificate of Residence (COR) is a document issued by IRAS to confirm an individual’s tax residency status. It is often required to claim tax treaty benefits.
    • To apply for a COR, log in to the IRAS myTax Portal and submit the application online.

5.2. For Companies

  1. Filing Corporate Tax Returns:

    • Companies must file their annual tax returns by 30 November (for paper filing) or 15 December (for e-filing).
    • Tax residency status is determined based on where the company’s control and management are exercised.

  2. Requesting a Certificate of Residence (COR):

    • Companies can apply for a COR through the IRAS myTax Portal to claim tax treaty benefits.

6. Country-Specific Considerations

6.1. Tax Treaties

Singapore has an extensive network of Avoidance of Double Taxation Agreements (DTAs) with over 80 countries. These treaties help prevent double taxation and provide tax relief for residents of treaty countries. To claim benefits under a DTA, individuals or companies must provide a COR to the foreign tax authority.

6.2. Cultural Aspects

  • Efficiency and Compliance:
    • Singapore places a strong emphasis on efficiency and compliance. Taxpayers are expected to file their returns accurately and on time. Penalties for late filing or non-compliance can be significant.
  • Digital Systems:
    • Singapore’s tax system is highly digitized, and most tax-related processes can be completed online through the IRAS myTax Portal.
  • Professional Assistance:
    • Many expatriates and businesses engage tax consultants or accountants to ensure compliance with Singapore’s tax laws.

7. Practical Tips for Visitors and Immigrants

  1. Track Your Days in Singapore:

    • Keep a record of your physical presence in Singapore to determine your tax residency status accurately.

  2. Understand Your Tax Obligations:

    • Familiarize yourself with the tax rates and reliefs applicable to your residency status.

  3. Apply for a COR if Necessary:

    • If you need to claim tax treaty benefits, ensure you apply for a COR in advance.

  4. Seek Professional Advice:

    • If you are unsure about your tax obligations, consider consulting a tax professional or contacting IRAS for guidance.

8. Key Resources

By understanding the tax residency rules and procedures in Singapore, individuals and businesses can ensure compliance with local regulations and take advantage of the tax benefits available to them.